Binance’s Legal Battles in the US: CZ Sentenced

On April 30, former Binance CEO Changpeng Zhao, also known as CZ, was sentenced to four months in prison in a Seattle courtroom for violating U.S. money laundering laws. This comes after years of investigations by U.S. authorities into Binance, the crypto exchange founded by Zhao. During the hearing, Judge Richard Jones stated that there was no evidence to suggest Zhao knew about any illegal activities taking place at Binance, dismissing the Department of Justice’s recommendation for a harsher sentence. Despite the prison term and hefty fines imposed on the company, U.S. authorities have been investigating Binance for the past six years.

The trouble for Binance began in 2018 when the Department of Justice launched an investigation into the exchange’s compliance with U.S. Anti-Money Laundering laws and sanctions. Prosecutors were looking into charges related to unlicensed money transmission, money laundering conspiracy, and criminal sanctions violations. Around the same time, the Commodity Futures Trading Commission also started probing whether Binance offered crypto derivatives to U.S. customers without the necessary registration.

In 2022, the U.S. Securities and Exchange Commission (SEC) investigated the relationship between Binance.US and trading firms Sigma Chain AG and Merit Peak. They were interested in how these firms disclosed potential links to users. The SEC also initiated another investigation into Binance Holdings’ 2017 initial coin offering (ICO) for possible unregistered securities sales.

In 2023, the SEC and the Commodity Futures Trading Commission sued Binance, Zhao, and compliance chief Samuel Lim for trading irregularities and market manipulation. Binance had a daily trading volume of over $8.5 billion at the time. Zhao denied the allegations, claiming that the exchange did not trade for profit or manipulate the market in any way.

The Department of Justice launched yet another investigation into Binance in May 2023, focusing on potential violations of U.S. sanctions by allowing Russians to access the cryptocurrency exchange. Despite restricting its services in Russia following sanctions imposed in April 2022, Binance continued to operate in the country until September of that year.

In June 2023, the SEC filed charges against Binance and Zhao for violations of securities law. The allegations included inadequate market oversight and potential wash trading. The SEC claimed that Binance failed to restrict U.S. investors from using its platform and that Binance.US engaged in wash trading through its market-making trading firm Sigma Chain, which was owned by Zhao. The suit also alleged that funds from Binance and Binance.US were mixed into an account controlled by Merit Peak Limited, associated with Zhao. As a result of the charges, Binance.US saw a significant reduction in its activities.

As the investigations into Binance intensified, senior executives at Binance.US and other Binance firms started leaving the company. This wave of departures continued for months, resulting in at least ten key executives departing the company.

By August 2023, the Department of Justice was considering fraud charges against Binance and expressed concern over the possibility of a bank run affecting consumers. The authorities were exploring alternatives to criminal charges, such as fines or non-prosecution agreements, to minimize harm to customers.

In September 2023, Binance.US laid off about 100 employees, or one-third of its workforce, and CEO Brian Shroder left the company. The SEC complained to the court about Binance’s lack of cooperation in the discovery process, citing unintelligible screenshots and unsigned, undated documents provided by Binance’s parent company.

In November 2023, CZ stepped down as CEO of Binance following a $4.3 billion settlement with U.S. authorities. The settlement included fines for various violations, including the failure to maintain an effective Anti-Money Laundering program. Richard Teng took over as the new CEO of Binance. As part of the settlement, Zhao pleaded guilty to one felony charge and expressed responsibility for his mistakes.

The timeline of events reveals the lengthy investigations and legal actions faced by Binance and its former CEO CZ, culminating in a prison sentence for Zhao and significant penalties for the company.

11 thoughts on “Binance’s Legal Battles in the US: CZ Sentenced

  1. It’s a shame that Binance’s actions have tarnished the reputation of the crypto industry.

  2. Layoffs and executives leaving the company are unfortunate consequences of these investigations. It must be a challenging time for the employees affected by these changes.

  3. Money laundering and market manipulation? Binance should be ashamed. 😠

  4. I can’t believe Binance.US didn’t cooperate in the discovery process. What a mess!

  5. Binance’s lack of compliance has finally caught up with them. Justice served! 👮‍♂️💥

  6. It’s sad to see such a prominent figure in the industry involved in illegal activities.

  7. More evidence of Binance’s lack of oversight. They deserve the punishment.

  8. This is such a disgrace to the crypto industry. Binance really let us down.

  9. The amount of scrutiny Binance has faced over the years is staggering. 😮 It’s clear that regulatory bodies are determined to ensure proper compliance with securities laws and prevent market manipulation. 👮‍♀️

  10. The continuous departures of key executives from Binance during the investigations is definitely not a good sign. It will be interesting to see how the company moves forward and strives to regain trust in the industry.

  11. It’s disheartening to see a once-reputable exchange go down this path.

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